How does transparency influence the corporate abuse allegations, concerning in particular environmental and development & poverty issues : a multiple-case study of oil, gas and mining companies in Nigeria and Colombia

(1)

How does transparency influence the corporate abuse allegations,

concerning in particular environmental and development & poverty

issues

A multiple- case study of oil, gas and mining companies in Nigeria and Colombia

Faculty of Economics and Business

Master’s program in Business Studies

Strategy track

Author: Munisha Abudunabi

Student number: 10609385

Supervisor: Michelle Westermann-Behaylo

Second reader: Arno Kourula

Theme: International Business and Human Rights: Evaluating Risk Factors

and Outcomes of Corporate Human Rights Violations.

(2)

ABSTRACT:

Transparency is playing an important role for company in information transaction inside, also affecting the social development outside. Increasingly firms cause violations to the environment and the local community through their operational activities, and they face the challenge of protecting human rights. The question emerges, does transparency have an impact on reducing corporate abuse allegations (CAA’s)? Separately, the literature on transparency and human rights are abundant, however research linking these two concepts together are limited. There is a research gap between the possible factors that cause abuses with CAA’s. This study builds on existing literature about transparency and human rights, and attempts to examine whether transparency is a critical factor influencing firm’s social performance. Data provided by the CHRD Database, ORBIS and additional secondary data on six firms were coded and analyzed to identify the role of transparency. It also examines the impact of the Extractive Industries Transparency Initiative (EITI) in affecting relationship between transparency and human rights violation. The findings seem not support the proposition that with the increasing level of transparency, firms face less environmental and development and poverty problems. However, the positive role of EITI is supported that being a member of EITI seems face fewer development and poverty corporate abuses comparing with non-EITI members. These findings imply that transparency might not be a critical factor that can minimize corporate human rights abuses. Firms that are transparent to public also have high chance of becoming accused of human rights violations.

(3)

T

ABLE OF

C

ONTENTS

Abstract: ... 2

Chapter 1 Introduction ... 5

1.1 Research interest: ...5

1.2 Problem definition and research aims ...7

1.3 Structure of the thesis ...7

Chapter 2 Literature review ... 7

2.1 Human rights and CAAs ...7

2.2 Transparency ...9

2.2.1 Transparency and finance ... 10

2.2.2 Transparency and governance ... 11

2.3 Environmental issue ... 12

2.4 Development and poverty issue ... 14

2.5 eiti and development and poverty issue... 16

Chapter 3 Methodology... 18

3.1 Methodological Consideration and Research Approach ... 18

3.2 Research design ... 19

3.2.1 Case study ... 19

3.2.2 Multiple-case design ... 20

3.2.3 The quality of research design ... 20

3.3 Source of evidence and case selection ... 21

3.4 Coding and analyzing field data ... 25

Chapter 4 Background introduction of six cases ... 27

Chapter 5 Findings ... 28

5.1 Relationship between transparency and environment ... 29

5.1.1 Analysis from CEO letter ... 29

5.1.2 Environment information disclosure in CSR report ... 31

(4)

5.2 Relationship between transparency and development and poverty ... 37

5.2.1 Analysis from CEO letter ... 37

5.2.2 Development & poverty information disclosure condition in CSR report ... 38

5.2.3 Development and poverty information disclosure to employee ... 40

Chapter 6 Discussion and Conclusion ... 42

6.1 Discussion and Conclusion ... 42

6.2 Limitation and recommendations for future research ... 44

6.3 Conclusion ... 45

Reference: ... 46

Appendices:... 52

Appendix I: Samples of firms’ CSR reports ... 52

Appendix II: tables ... 54

(5)

M.Abudunabi Literature Review

C

HAPTER

1 I

NTRODUCTION

1.1 R

ESEARCH INTEREST

:

Nowadays an increasing attention has been put on the interrelation between business and human rights. The topic which links business and society issues together is not unique and the studies discussing this are plentiful. However, most of them focus on business ethics and social responsibility problems and are viewed at a national perspective. Relatively few articles are carried out to investigate the factors as well as the outcomes of human rights at the firm level. It is true that the power and influence of corporations, particularly multinational company, have grown with the increasing freedom of markets, increasing flow of information and the rapid movement of capital around the world (Lauwo, S., & Otusanya, O. J., 2014, June). Meanwhile the cases that the activities of large multinational enterprises (MNEs) cause harm to human rights are increasing as well. Especially when they operate at developing countries where governments lack control and people lack awareness of human rights. As the result of growing power of MNEs and observance of corporate compliance to human rights, a group of experts was established by UN Sub-Commission in 1998 (Ruggie, 2007) and in 2011, the UN “Guiding Principles on Business and Human Rights” were published (UNHRC, 2011), in which the firms’ obligations to respect human rights and act due diligence are outlined (Ruggie, 2013). According to Ruggie (2008), the principle of due diligence means

“process whereby companies not only ensure compliance with national laws, but also manage the risk of human rights harm with a view to avoiding it. The scope of human rights related due diligence is determined by the context in which a company is operating, its activities, and the relationships associated with those activities”

The scope of corporate abuse allegations (CAAs) is determined by the context in which a company is operating, its activities, and the relationships associated with those activities (Ruggie, 2008).Normally, CAAs can be divided into four categories: health issue, environment, labor, and

(6)

development and poverty. The establishment of these principles helps to guide MNEs in their compliance with human rights standards and to systematically study the human rights abuses and identify the causal factors as well.

Environment and poverty are two main issues faced by developing countries and the firms operating therein (Wiseman, J., 1982). As large portions of the public continue to view business as an enemy of the environment (Lyon & Maxwell, 2011), an increasing pressure has been applied by stakeholders (such as, investors, customers and shareholders) on companies to disclose their information of environmental problems and improve their performance in this area. When concerned about poverty issues in developing countries, the paradox in extractive industry – an inverse relationship between wealth and poverty – is recognized. (Paul D. Ocheje 2006). In reality, extractive industries create a large amount of value and play a crucial role in the national economy. However, these resource-rich developing countries have not been able to use oil and mineral wealth to reduce poverty. In most cases, poverty has worsened. This affliction is known as the “resource curse” (Humphreys, 2005). Similar to environmental issues, many scholars believe business has negative impact on local community development as firms are less interested in long-term sustained operations (Kolk, A & Tulder, R., 2006). So the demand of releasing information to public is increasing and as a result, transparency inevitably becomes a growing trend in business world.

The study of transparency is a topical, broadly relevant, but also more under-researched concept. Vishwanath and Kaufmann, (1999) divided transparency into two categories: financial transparency and governance transparency because transparency is indispensable and has a positive impact on both financial and governance sectors. Lindenberg & Foss (2011) point out that transparency can create a sustained motivation which improves the joint production of employees and as a result lead to better corporate performance. The growing importance of transparency in the field of business raises more and more attention to disclosure issues. But the researches which linked transparency to human rights are still limited. This is the research gap I will focus on.

(7)

1.2 P

ROBLEM DEFINITION AND RESEARCH AIMS

From literature about the environment, poverty and EITI, we can identify transparency as an important aspect in the context of CAAs. However, studies on examining the relationship between these concepts are limited. The main reason for this, I believe, is that unavailability of documents and data for a systematic study, the information on disclosure in firms is limited.

Consequently, because of the above concern and the theoretical gap I have identified, this research aims to discover how transparency influences a firms’ performance in environment and development and poverty issues. This study tries to find out to what extent, disclosure level can reduce the CAAs and have a positive impact on the environment and society – it also aim to discover the impact of EITI membership on the relationship between transparency and poverty CAAs. An in-depth multiple-case study, which provides a real picture of the extent of transparency in oil and gas companies, was chosen as the appropriate research method for this study.

1.3 S

TRUCTURE OF THE THESIS

This thesis is structured as follows: in the second chapter I will outline the theoretical framework that is provided by previous studies. I will look into different aspect of transparency, environment issues, development and poverty issues, and EITI and then present my hypotheses. The third chapter will explain the approach and methods used in my research. In chapter 4 I will briefly introduce the background of the six cases I have selected. And then in chapter 5, I will present my findings of the multiple-case study. In the final chapter, the findings will be analysed in relation to the theoretical framework. Further, in this section the central research question will be discussed and answered, and the limitations of the study and suggestions for further studies will also be discussed.

CHAPTER 2 LITERATURE REVIEW

2.1 H

UMAN RIGHTS AND

CAA

S

(8)

ethics, corporate social responsibility and sustainable development. These concepts have been developed well and analysed deeply during the last century (Quaak, Aalbers and Goedee, 2007). However, the research linking human rights to business are relatively fewer. With an increasing awareness of human rights in business world, the study connecting these two fields is increasing significant and necessary.

John Ruggie who is one of the most influential people in business and human rights field produced the UN “Guiding Principles on Business and Human Rights” (UNHRC, 2011), which was embraced unanimously by the UN Human Rights Council and many governments. This guidelines for MNE promote cooperates to engage in due diligence concerning human rights. This due diligence refers to the State’s duty to protect human right, a corporate responsibility to respect human rights and the need to provide remedies to respond to violations of human rights by business (Ruggie, 2011). More and more states and industries feel that the issue of business and human rights requires serious attention and sought ways to keep it on the agenda (Ruggie, 2007). Thus the role of corporations in human rights protecting become more important.

On the other hand, with the rapidly increasing amount of transnational companies, the impact of this growth in transnational economic activity on human rights becomes more apparent as well (Ruggie, 2011). The power and influence of corporations, particularly multinational companies, have grown with the increasing freedom of markets, increasing flow of information and the rapid movement of capital around the world (Lauwo, S., & Otusanya, O. J., 2014, June). Meanwhile, tensions between the corporate pursuit of business objectives of profitability, as instituted in a corporate governance structure, and the human rights of populations within the host states where such corporations seek to invest, are paid more and more attentions (Whelan, Moon, & Orlitzky, 2009). In the context of globalization, it appears developing country’s governments lost their ability to set and enforce regulations that promote corporate accountability for human rights obligations (Lauwo, S., & Otusanya, O. J., 2014, June). This increases the chance of human right violations because multinational companies invest in developing countries through foreign investment contracts, the

(9)

terms entered upon in the investment agreements might limited the host countries’ ability to govern or restrict activities of large corporations (Sikka, 2011). Thus, under the circumstance of globalization, human rights issues are increasingly highlighted as factors that need to be taken into consideration within the corporate governance system. In this context, there is an increasing need to pay serious attention on the relationship between human rights and corporations.

From a corporate standpoint, human rights are not a legal matter but rather a perspective. Businesses are regarded as duty-bearers, taking on the duty to “respect” the human rights that governments are duty-bound to protect and promote justice (Salcito, K. et.al. 2013). The corporate duty to “respect” human rights is an active duty requiring verification processes to demonstrate that operations do not negatively impact human rights (Ruggie, 2011). Human rights issue occurring in the corporate sector can be called corporate abuse allegations (CAAs) which have been divided into four categories: health issue, environment, labour, as well as development and poverty. Physical abuse as a sub-category is also highly valued as a human rights issue. As there the literature covers human rights deeply and comprehensively, it is not a new and novel topic. However, there are little studies focused on identifying the factors that might cause corporate abuse, and the outcome of corporate abuse. There are some articles that more or less mention it (e.g. Hamann 2009), but due to the lack of good datasets most of them are written based on a particular case. As a result the reliability of the generalization of those studies is limited. Thus the need for systematic analysis about the factors or outcomes of corporate abuse allegation and their internal relationships is increasing - and that is the research gap I will work with.

2.2 T

RANSPARENCY

In the past few years, transparency has been paid great attention from both policy makers and scholars, and a lot of research was carried out from the view of corporate management. However, with many different definitions and coverage, there is no consensus about how to classify the concept. Lindenberg & Foss (2011) mentioned the concept of transparency in their study and described transparency as a clear common goals and design of task and team in organization. Street & Meister

(10)

(2004), on the other hand, state that the concept of transparency can be divided into two different types: external transparency and internal transparency. External transparency refers to the outcome of communication behaviours occurring outside of the organization. Different organizational theories have different understanding of external transparency. For instance, within the accounting and finance literature, transparency is considered as the observability of transactions, for both investment (e.g., Phillips et al. 2002) and regulatory (e.g., Vishwanath & Kaufmann, 2001) purposes, and normally appears in the form of a report (e.g. annual financial report). While from the supply chain management perspective, transparency is described as an information exchange between supply chain partners (e.g. Lamming et al. 2001). In terms of marketing literature, information flow from the customer is treated as an essential form of disclosure. Internal transparency also has different understanding and forms from different theoretical perspectives. When talking about internal transparency, scholars focus on disclosure activities that happen inside firms. Bushman, R.M. et al. (2004) suggest another way to analyse the concept of transparency. They defined transparency as the availability of firm-specific information to those outside publicly traded firms and distinguished transparency into two categories: financial transparency and governance transparency. This classification entirely reflects the importance of transparency in both financial and governance field. Vishwanath & Kaufmann (1999) followed a similar idea and said that the reason we are concerned about transparency is that it enables two interlocked engines of welfare and development, namely governance and economic markets. The following sections will discuss these two kinds of transparency separately and in detail

2.2.1TRANSPARENCY AND FINANCE

Transparency plays an increasing vital role in financial market. From the financial perspective, Kopits and Craig (1998) suggest that transparency may affect economic outcomes through financial market which are regarded as one of the main channels to influence economic outcomes. In a speech in 1999, the Managing Director of the IMF mentioned transparency as the “golden rule” for the new international financial architecture. The benefit of transparency can be illustrated from resource allocation efficiency, and the prospects for growth perspectives (Vishwanath & Kaufmann, 2001).

(11)

Many authors explain the importance of transparency in the financial market from the transaction cost view. They stated that introducing price transparency can lead to better deterrence and detection of deceit to the bond markets. This simultaneously improves pricing efficiency and competition can in turn lower transaction costs. Edward A.s’ (2007) study shows that transparent bonds have lower transaction costs than non-transparent bonds, and that transaction costs decrease when bonds become price transparent. Moreover, transparency also contributes to ensure greater financial stability (Vishwanath & Kaufmann, 2001; Kopits & Craig, 1998). They suggest that capital markets today not only trade in money but also in information itself, and information asymmetry and uncertainty are inherent features of finance. Investor, therefore, must collect as much information as possible to select projects and to manage their performances. Increasing transparency means that a growing amount of information is disclosed and available in the market, and as a result market uncertainty is reduced. What’s more, there is also evidence to suggest that a lack of transparency has worsened financial crises in Asia and Mexico, e.g. Caprio (1999). In sum, transparency has a far-reaching impact on financial market and the increasingly important role it plays in risk reduction and information disclosure requires that more attention be given to it.

2.2.2TRANSPARENCY AND GOVERNANCE

Among policymakers there is growing recognition of the importance of transparency to governance for the following reasons. First of all, informed decision will be made by the public with greater openness and wider information disclosure. At the same time, transparency can also contribute to improving the accountability of governments, and reduce the scope for corruption (Vishwanath & Kaufmann, 2001). Similarly, Carla.M et al. (2005) also mentioned that transparency in governance has an influence on the strategic behavior and performance of firms. The OECD (1998b) highlighted the importance of transparency on corporate governance in its report. It stated that the disclosure of governance structures may lower uncertainty which can benefit investors and help reduce capital costs. Moreover, this openness could also promote a common understanding of institutions or the ‘rules of the game’ which in turn will lead to better decision and strategy. Through the above discussion, it is clear that transparency makes significant improvements to financial and governance

(12)

fields and it inevitably should be an integral part of social and economic research.

Environment and poverty are issues of continuing salience to human beings in general as well as academic research. Since transparency has significant positive impact on improving performance in social and financial field, it is interesting and meaningful to analyze the impact of transparency on environmental and development and poverty issues and to check whether transparency would have similar positive influences on reducing human rights abuses.

2.3 E

NVIRONMENTAL ISSUE

Environmental problems are a controversial issue and a global concern in today's society. We are in the midst of environmental issues every day and it seriously affects our normal life. Academia, government and business are all working on identifying the causes and proposing solutions to environmental problems. The question as to what causes the worsening environmental circumstances is sometimes controversial, but there are a number of underlying causal factors of environmental problems with which most can agree. For instance, the release of greenhouse gases and the use of the automobile are considered to be main causes of climate change; poor land management and livestock overgrazing are the main source of land degradation; fuel combustion is a primary cause of air pollution and logging, mining, oil drilling and other methods of harvesting natural resources often lead to the destruction of habitats for many species. Indeed Leach and Mearns (1996) mentioned that the population density, industrial processes and the use of fertilizers are the main causes for the eutrophication of river systems, estuaries and seas. Above factors seem indicate that the worsening environmental circumstance mainly results from rapid industrialization. Business seems to be the opposite of environmental protection. More, poverty is also treated as a cause of environmental degradation which cannot be ignored. Some scholar stated that due to poverty, people are like to destroy the environment to make a living (Leach & Mearns, 1995; H.M.Ravnborg, 2003). The World Bank (1992) joined the consensus with its World Development Report, where it explicitly states, “poor families who have to meet short term needs mine the natural capital by excessive cutting of trees for firewood and failure to replace soil nutrients.” Following these ideas, I am going to present

(13)

one more variable – transparency – that might also have positive or negative impact on environment.

Environmental performance is a major issue facing corporations (Wiseman, J., 1982). As large portions of the public continue to view business as an enemy of the environment (Lyon & Maxwell, 2011), an increasing pressure has been put by the stakeholders (such as, investors, customers and shareholders) onto companies to disclose their information of environmental problems and improve their performance in this area. Many countries set up laws to command companies to promote environmental reporting. For example, Denmark was the first country in the world to introduce a law requiring approximately 1000 companies to publish annual environmental reports, called "green accounts" which aim to stimulate the most polluting companies to improve their environmental performance. And it is reported that 41% of the reporting companies experienced environmental performance improvements as a result (Lars Bjorn Larsen, 2000). Moreover, Netherlands, from the fiscal year 1999 onwards, established a law which requires over 200 firms in the Netherlands to publish an environmental report (Ans Kolk et al., 2001). Based on those facts, I propose that there may be a positive relationship between the transparency of environment performance reporting and environmental performance.

Besides this, there is also academic literature supporting the above argument. According to a resource-based view, corporate strategy can lead to sustainable competitive advantage if it owns heterogeneous resources are valuable, rare, difficult to imitate, and non-substitutable (VRIN) (Barney, 1991). On this basis, environmental transparency can be treated as a kind of VRIN resource which can contribute to achieving competitive advantages---better environmental performance, through corporate environmental reporting. Besides, since the public awareness of environmental issues has increased significantly over the past decade, the link between environmental performance and corporate image is now stronger than ever (Lars Bjorn Larsen, 2000). As environmental reporting is regarded as the best channel to establish and maintain a positive reputation and image about environment, it is obvious that a firm would improve its performance before reporting to the public in order to maintain a good image. This positive relationship between environmental reporting

(14)

and environmental performance is also supported by Al-Tuwaijri et al.’s(2004) article. Moreover, Lindenberg & Foss (2011) talk about transparency from the perspective of organizational management and proposed that the clearer the common goals, the various roles in which individuals help to reach those goals, and the functional connections of tasks and goals between different levels of the firm, the easier it is for employees to develop and sustain motivation for joint production. This results in better performance. This idea can be applied to explain the positive relationship between environmental reporting and environmental performance by arguing that the more transparency in environmental reporting, the clearer the environmental goals are to employees as well as managers, resulting in better environmental performance in the end. According to above arguments, my hypothesis is:

H1a: Companies that are transparent about the environment have fewer environmental problems.

Environmental reporting is regarded as the most common way for firms to present their performance and let stakeholders easily access environment related information. It can help to distinguish between good and not-so-good environmental performers in the market (Lars Bjorn Larsen, 2000). Those firms with high environmental performance have higher motivation to report their environmental issues in order to be part of good performer in the market. On the contrary, it is risky for firms with worse environmental performance to disclose their information and they have less motivation to do so since they do not want to be regarded as inferior by stakeholders. This prompts the following hypothesis:

H1b: companies that are not transparent about the environment have more environmental problems

2.4 D

EVELOPMENT AND POVERTY ISSUE

There is a paradox in extractive industry: an inverse relationship between wealth and poverty. (Paul D. Ocheje 2006). It is true that extractive industries create a large amount of value and play a crucial role in the national economy. However, those resource-rich developing countries have not been able to use oil and mineral wealth to reduce poverty. In most cases, poverty has worsened. This affliction is known as the “resource curse” (Humphreys, 2005).

(15)

The relationship between business and poverty is another significant aspect in this study. It is a complex question and there is no consensus on it. Companies play multiple roles in relieving poverty and in the development of local community as a provider of goods and services, an employer of workers, and as an investor and lobbyist to influence policy making (P. Newell & J. Frynas, 2007). Form these perspectives, firms have the power to alleviate poverty and influence local development. More specifically, firms as investors and tax-payers can contribute to poverty reduction through generating funds that might then be used for poverty reduction purposes in developing countries (Rhys Jenkins, 2005). Another main way in which business can make contribute is through job creation. By creating positions to employ people, a portion of the family can get rid of poverty, whilst also increasing the supply of consumables to the market (Alan E. Singer, 2006; Rhys Jenkins, 2005). Besides this, firms can influence policy making through lobbying to challenge the existing oppressive regimes (Alan E. Singer, 2006). Through conducting philanthropic projects such as building a school, a clinic or a water treatment plant, firms can bring enormous short- and long-term benefits to a community (P. Newell & J. Frynas, 2007). Last but not least, entrepreneurial activities can also improve the capabilities of local people, through skill development and the sharing of knowledge. (Alan E. Singer, 2006).

However, business inevitably has negative local impacts as well. For example, multinational companies may merely create low-wage jobs, which in return increase inequality in societies. As well as this, firms may use their powerful political and economic position in the host country and internationally, to make policies beneficial to them which exacerbate market and social unfairness. Finally, companies can be less interested in long-term sustained operations and have a negative impact on the physical environment (Kolk, A & Tulder, R. 2006).

In order to attract more attentions from stakeholders, companies nowadays have to take actions to minimize the negative impacts on society and improve their reputation. Corporate social responsibility (CSR) is a popular approach which can improve the firms’ image as well as address

(16)

the social issue. According to World Business Council for Sustainable Development:

“Corporate Social Responsibility (CSR) is the continuing commitment by business to contribute to economic development while improving the quality of life of the workforce and their families as well as of the community and society at large.”

Development and poverty abuses therefore can be treated as the opposite end of the spectrum to CSR; the result of corporate social irresponsibly.

As we all know, the public are good at holding companies to account for the social consequences of their activities. The ranking of companies’ social performances is increasing and attracting more and more attention from the public. As a consequence, CSR has emerged as a priority for business leaders in every country (Porter and Kramer, 2006). Due to the increasing attention to CSR and the pressure to disclose from stakeholders, corporate social responsibility reporting (CSRR) comes as response to these challenge (Hooghiemstra, R., 2000). Reynolds & Yuthas (2008) pointed out that stakeholders will react to the information provided in CSR reports and their actions taken according to these reports will have large impact on firms’ further performances. In other words, the disclosure of CSR impacts and improves the social performances of firms. Also, Gelb & Strawser, (2001) proposed a positive relationship between CSR transparency and social performance, stating that companies with higher CSR ratings tend to provide more extensive disclosures than their peers. Development abuses and poverty, as one of the dimension of social performance, can be treated as the opposite side of good social performance. Thus I propose a negative relationship between CSR transparency and development and poverty problems emerging:

H2a: companies that are transparent about poverty have fewer development and poverty issues. H2b: companies that are not transparent about poverty have more development and poverty issues.

2.5

EITI AND DEVELOPMENT AND POVERTY ISSUE

Nowadays, under the globalization circumstance, more and more transnational corporations expand their activities, sourcing globally, meanwhile, the negative social and environmental externalities of these activities are increasingly criticized (Mena & Palazzo, 2012). Multi-stakeholder Initiatives

(17)

(MSIs) have been strongly recommended as a strategy for filling global governance gaps. With a rising public concern about both global environmental degradation and poor labor conditions among transnational firms, corporations are increasingly confronted with the need to address new social and environmental concerns (Moog, S., Spicer, A., & Böhm, S., 2014). In response to such pressure, more and more managers decide to collaborate with non-governmental organizations (NGOs) and other civil society actors to improve their work and minimize negative impacts on environment and society. As MSIs can bring multiple stakeholders to a common platform and come up with or carry out suitable mechanisms for addressing governance issues (Utting, 2001); promote knowledge and expertise sharing, have specific qualities related to creating a ‘dialogue across the corporate boundary’ furthering consensus-building and consequently lead to higher effectiveness (Fransen & Kolk, 2007); and encourage democratic deliberation and effective forms of environmental and social regulation (Moog and Böhm, 2014), MSIs become a format of choice to deal with increasing social and environmental issues.

The Extractive Industries Transparency Initiative (EITI), for instance, is a global MSI which is launched by the British government at the World Summit on Sustainable Development in Johannesburg in 2002 (Rhys Jenkins, 2005). This brings together business, governments, international agencies and NGOs to promote transparency in payments made by extractive transnational companies to governments and government-linked entities and try to create a feedback circle between the government and the governed. According to Susan Ariel Aaronson (2011), 32 nations have adopted EITI, and the numbers are rapidly increasing. The aim of EITI is to encourage the deployment of revenues from natural resource extraction in developing countries towards the satisfaction of basic needs, such as health and education, and alleviate poverty by ensuring good use of the taxes given to the government by the enterprises. EITI asserts a growing pressure to disclosure financial information of firms and the government, and bring corporate, government and civil society together to deal with the social issues. Subsequently, we can hypothesise that:

(18)

In sum, the research gap with which this paper is concerned is the interrelationship between transparency and CAAs, with particular reference to the environmental as well as developmental and poverty issues. My research question is: How does transparency influence the corporate abuse

allegations, concerning in particular environmental and development & poverty issues? Below is the

model of my thesis.

Figure 1 Theoretical framework

CHAPTER 3 METHODOLOGY

This chapter is divided in six sections. The beginning of the chapter will describe the methodological consideration and research approach. The second section will discuss the research design. The third section will describe the sources of evidence and case selection. Coding and data analysing will also be outlined.

3.1 M

ETHODOLOGICAL

C

ONSIDERATION AND

R

ESEARCH

A

PPROACH

Trochim (socialresearchmethods.net, 2006) states that “all research is based on assumptions about how the world is perceived and how we can best come to understand it.” The selection of the methodological approach of our study is based on the division that lies between the two main branches of the social science theory: objectivism/positivism and subjectivism/constructivism. Subjectivist philosophy is normally applied more in qualitative research while objectivist philosophy

(-) (-) Transparency

Environmental CAA

Development & Poverty CAA

(19)

M.Abudunabi Methodology

is applied more in quantitative research (Holden & Lynch 2004).

Cohen & Crabtree (2006) said that research conducted from a positivist approach tends to regard social phenomena as objective and measurable facts. They emphasize that when doing research from a positive approach, the researcher’s subjective biases have to be distinguished from the objective reality. Objectivism “attempts to explain the social world by bracketing individual experience and subjectivity and focusing on the objective conditions which structure practice independent of human consciousness” ( Bourdieu, 1993).

Conversely, Sutton contrasts objectivism with the features that characterized qualitative research, stating that qualitative research is based on the presentation of verbal assumptions and interpretations of reality rather than on numerical data in which quantitative research is based. In this way, subjectivism presents reality as a judgment that we make based on points of view determined by certain socially institutionalized rules (Olsen and Pedersen, 2006). Within subjectivism, the world can be understood from different perspectives and the understanding is based on the primary experiences of the individual (Bourdieu, 1993).

This paper is based on a subjective approach of a social construction of reality. The findings are interpreted in accordance to the academic knowledge that we have selected and prioritized .The present research will focus on the impact of the level of firm disclosure on the corporate environmental and development abuse allegations, which assumes corporate abuse allegation are constructive. Furthermore, the level or degree of firm transparency is interpreted according to related academic knowledge. Therefore, it is logical that the qualitative subjectivist philosophical approach is best suited to guide the generation and analysis of data in this study.

3.2 R

ESEARCH DESIGN

3.2.1CASE STUDY

(20)

the case study from other research methods, and suggests three situations in which using a case study may be appropriate. These are: (a) The research question seeks to explain “how” or “why” a particular phenomenon occurs, (b) the researcher has less control on the research objects, and (c) the research focuses on a contemporary social context, such as individuals or a small group of participants. Taking this as a guide, the case study approach seemed appropriate for use in the current study, given that it was interested in how firm transparency levels influence the environmental and development and poverty CAAs. Note that the generalization of a case study’s results is made to theory and is not about populations. There has been a lot of criticism on case study research. Thus the design by Yin (2009) is followed in this research.

3.2.2MULTIPLE-CASE DESIGN

Multiple-case study with qualitative content analysis is selected as research strategy to examine the data, which seems the most appropriate in relation to the research question. The multiple-case design has some advantages and disadvantages compared to the single-case design. By replicating the patterns, multiple-cases are considered to be more compelling, and the overall study is therefore regarded as being more robust. Then again, multiple cases cannot satisfy the rationale for the single-case design. Every case must have a specific purpose within the scope of the research and therefore each case must be carefully selected when considering a multiple-case design, (Yin, 2009).

3.2.3THE QUALITY OF RESEARCH DESIGN

The source of evidence of this study is the firms CSR reports posted on their websites and the qualitative content analysis method is used to interpret the text of the case study. Yin (2009) stated that every research design is supposed to represent a logical set of statements, so judging the quality of any given design according to certain logical tests is necessary. There are four criteria for judging the quality of research design. Because case studies are one form of such research, the four tests also are relevant to case studies. The four tests are (1) construct validity, (2) internal validity, (3) external validity, and (4) reliability. Table 1 displays the case study approaches that are used in this research to contribute to the overall quality. Using multiple source of evidence improves the construct validity of the research. Internal validity is achieved through explanation building. In terms of internal

(21)

validity, Yin (2009) emphasize that the logic of internal validity is inapplicable to descriptive or exploratory studies. External validity is increased by applying replication logic on the cases of this study. The final test, reliability, is aimed at minimizing the errors and biases in the study. Developing a case study database is a good way to ensure research reliability.

Test Case study Tactic Phase of research in which tactic occurs

Construct Validity Use of multiple source of evidence Data collection Internal Validity Not applicable, not for descriptive or

exploratory studies

External Validity Use of replication logic in multiple-case study

Research design

Reliability Develop case study database Data collection

Table 1 Case study tactics for research quality (adapted from Yin, 2009)

3.3 S

OURCE OF EVIDENCE AND CASE SELECTION

Case study evidence can come from many sources; documentation, archival records, interviews, direct observation, participant observation, and physical artifacts. This research uses several data sources: 1) archival data including company websites, CSR reports;2) qualitative data on human rights violations provided by the CHRD database, and 3) company details provided by the Orbis database.

CSR reports are one of the most important types of archival data analysed in this study. Compared with other types of evidence that may be used in a case study, documents have specific advantages. Documents are relatively stable since they can be reviewed repeatedly. Moreover, it is unobtrusive as it is not created for the purpose of the case study. The information in the documents is exact and the coverage of information is broad compared with interview or observation methods (Yin, 2009). As documents play an explicit and important role in research, systematic searches for cases and relevant

(22)

documents are important in the data collection plan.

Based on the concerns of data availability and topic particularity, I will focus on extractive industry in my research to explore the impact of transparency on environmental and development and poverty issues for the following reasons. On the one hand, the nature of oil, gas and mining operations involve many potential negative environmental effects, particularly during exploration and production, including, oil spills, natural gas emissions and land clearance (Frynas, 2009). On the other hand, extractive industry generate relatively few jobs compared with manufacturing or services industries, and they are also, to some extent, responsible for distorting national economies and weakening good governance. As a result the countries with rich resources always face the serious poverty problem known as “resource curse”(Frynas, 2010). Besides this, the oil gas industry is the leader in terms of CSR and CSR reporting, partly due to the pressure to manage its relationship with wider society.

There are many countries which experience both rich resources and serious human rights abuses. Based on the consideration of data availability and EITI diversity, I chose 3 firms from Nigeria and Colombia. Being both resource wealthy and active in EITI are two main reason for choosing Nigeria. Nigeria is the largest oil producer in Africa and also the fifth largest oil producer in the OPEC (Organization of Petroleum Exporting Countries)(Lambooy & Rancourt, 2008). Because of its abundant resource reserves, Nigeria's economy is mostly dependent on the crude oil which represents over 95% of export receipts and over three quarters of government revenue.1 However, in contrast with its plentiful resources, Nigeria also faces various urgent environmental and poverty problems, including frequently oil spill, emissions of toxic pollutants, a high unemployment rate and a large amount of underprivileged communities. In regards to EITI, Nigeria was the first country to come out formally and declare its intention to implement EITI (Eigen, 2006). It published EITI reports

1

WTO, Trade Policy Reviews: First Press Release, Secretariat and Government Summaries, Nigeria, June 1998, http://www.wto.org/english/tratop_e/tpr_e/tp75_e.htm (last visited on 17 May 2014).

(23)

annually from 1999-2011 (the most among all members).2 In order to test the influences of the membership of EITI on poverty alleviation, I also choose 3 extractive companies from a non EITI country—Colombia, which has similar resource, economy and society conditions to Nigeria. This pair is adequate for comparing and contrasting research and serves as an appropriate set to study to help answer the research questions guiding this study as it can cover the transparency, environmental CAA, development and poverty CAA variables discussed earlier.

After deciding the country selection, selecting oil and gas or mining companies as study cases from Nigeria and Colombia is the next step to go further. When choosing cases, a consideration of all variables and the need to compare and contrast is emphasized. As I mention above, the goal of this paper is to find out the relationship between transparency and CAAs. Thus comparing the disclosure level between firms with CAAs and firms without would be the most rational and effective way. The CHRD database provides this study with data from all of the CAAs events that have happened in Africa and Latin America from the year 2000 to the present. In other words, all of the firms that have caused corporate abuse allegations are on the list of this database. Through selecting and analysing the data of Nigeria and Colombia, I choose two firms from each country with the greatest number of environmental and development & poverty CAAs records. In order to answer the research question of whether the disclosure level is a causal factor in corporation’s performances on human rights, selecting firms without CAAs on record is necessary to conduct comparative analysis. I use the Orbis dataset that lists all of the firms from extractive industries in Nigeria and Colombia and then select two firms in total from these countries to represent firms without CAAs record on the CHRD database.

Shell and ExxonMobil are two firms that have operated in Nigeria that have been accused of human rights violations. Addax Petroleum is a Chinese oil & gas company that operated in Nigeria without any corporate human rights abuse allegations. Similarly, Ecopetrol and Drummond are two

2_{From EITI website}_{http://eiti.org/countries/reports}_{(last visited on 17 May 2014 )}

(24)

companies chosen as they have been accused of human rights violations when operating in Columbia. And Petrobras is a firm that has operated in Colombia but is not on the list of CHRD database. This selection of cases can cover all of the variables in my hypotheses and enable me to explore the differences and similarities in terms of transparency between the firms with and without CAAs.

As I mentioned in the beginning of this section, documents from firms are the main source of evidence I use in this study to answer the research question. The CSR report as one of the popular and widely accepted form of documents is adopted by more and more firms around the world (Dhaliwal, D.S, et.al, 2011; Villiers, Charl de, et al, 2014). With the popularity and development of GRI (Global Reporting Initiative) guideline, the number and quality of firms engaging in CSR reporting is increasing. And as a result of its similarity to audited financial statements, the CSR is perceived to be highly credible ((Neu & Wright, 1992). The main contents of the CSR report are data and information about the firm’s activities and performances on environment, social development and human rights, which fit my research questions and cover all variables appropriately. Therefore, company CSR reports are the main evidence sources used in this research; reports from various companies published at different times have been analysed. Table 2 provides the list of companies and the CSR reports that were used in this study.

Company name and the operated country The year of report

Shell (Nigeria) CSR report 2006, CSR report 2012 ExxonMobil (Nigeria) CSR report 2008, CSR report 2012 Addax Petroleum(Nigeria) CSR report 2009, CSR report 2012 Ecopetrol (Colombia) CSR report 2010, CSR report 2012 Drummond (Colombia) CSR report 2010, CSR report 2012 Petrobras (Colombia) CSR report 2007, CSR report 2012

(25)

3.4 C

ODING AND ANALYZING FIELD DATA

In qualitative research, Darlington and Scott stress (2002) that coding is an essential process in data analysis, as it requires the researcher to make sense of the data and order them into categories. Abell and Myers (2008) state in their article that researchers will develop a database of codes that make sure all of the information in the documents will be carefully studied. When analysing qualitative research data, the database depends greatly on the focus of research (Darlington and Scott, 2002). Understanding the role of database, I developed the coding scheme based on my theoretical framework, and coded the documents using Nvivo software (Version 10.0). Nvivo enable me to code documents systematically, improving the accuracy and reliability of the coding result. The analysis procedure includes reading all the documents one by one and discovering some categories which are related to research question. Then, using the decided coding scheme and extracted all the information from documents and finally put them into the different categories which are called ‘nodes’ in Nvivo. The nodes I created for this study are: A) “CEO environment” which focuses on statements about the environment of CEO letters in the report; B) “CEO development & Poverty” which is similar to the previous one, relating to information about the development and poverty issues in CEO letters; C) “employee environment” which is related to information about how companies train their employees to prevent environmental CAAs and how companies disclose their information about the environment to their employees; D) “employee development & poverty”, this node is similar to node C which extracts information about development and poverty perspectives; E) “environment”, this node collects all of the information about the environment present in the documents. Dawkins & Ngunjiri (2008) classify statement in report into four levels: no policy disclosure, policy description, policy activity and policy outcome, and the level of transparency is incremental. In order to compare a firms’ transparent level, I followed their model and divided statements about environment into 3 levels: e1) environment issue description, which is about the information that describe the firms’ environmental performance in Nigeria and Colombia; e2) environment related activity, which includes sentences in reports that mention the firms’ activities regarding the environment; e3) environmental project outcome, which codes the information about the description of the outcome of

(26)

all kinds of environment project. F) Development and poverty, this node is also divided into 3 levels similarly to the environment node. They are: f1) development and poverty issue description; f2) development and poverty related activity; f3) development and poverty project outcomes. I coded related information from all CSR reports into those codes and sometimes one sentence which contains information of different dimensions was coded more than once. For example, the CEO of ExxonMobil stated in their 2012 CSR report that “Our long-term perspective helps us focus on our responsibilities for environmental protection, social development and economic growth”. In my coding system, this sentence was coded in both CEO environment node and CEO development & poverty node.

The coding scheme (Table 3) covers all the variables I focused on in this study.

Table 3 coding scheme

-CEO environment

-CEO development & poverty -Employee environment

-Employee development & poverty

-Environment Environment issue description Environment related activity Environment project outcome

-Development & poverty Development&poverty issue description Development&poverty related activity Development&poverty outcome

(27)

M.Abudunabi Findings

C

HAPTER

4 B

ACKGROUND INTRODUCTION OF SIX CASES

Shell

As one of the world’s leading energy companies, shell has played a pioneering role in Nigeria’s oil and gas industry throughout its history. It is the largest, oldest and most visible of the oil companies operating in Nigeria, by its own admission. In Nigeria, the Shell operated companies – The Shell Petroleum Development Company of Nigeria Ltd (SPDC) , Shell Nigeria Gas (SNG), Shell Nigeria Exploration and Production Company (SNEPCO) – employ more than 6000 employees and contractors of which more than 90% are Nigerians. Shell has voluntarily reported on environmental and social performance since 1997 and plays a leading role in sustainability reporting in oil and gas industry. However, Shell is also the firm with the most recorded occurrences of environmental and development and poverty CAAs in the CHRD Nigeria database which means it performed worse than other companies in protecting human rights in Nigeria.

ExxonMobil

ExxonMobil is the world’s premier petroleum and petrochemicals company and one of the six major petroleum product marketers in Nigeria with over 200 retail outlets located in all 36 states of Nigeria. It has over 2,000 employees, with over 90% being Nigerians. Nevertheless, according to CHRD Nigeria database, ExxonMobil is accused of polluting environment in Niger Delta region which is the major producer of palm oil.

Addax Petroleum

Addax Petroleum is a subsidiary of the Sinopec Group, one of the largest oil and gas producers in China, the biggest oil refiner in Asia and the third largest worldwide. Addax Petroleum began operations in Nigeria in 1998 by signing two Production Sharing Contracts (PSCs) with the Nigerian National Petroleum Corporation (NNPC). With the production in Nigeria, Addax Petroleum has no records of CAAs on the CHRD Nigeria database which means its operation in Nigeria has not caused any human rights violation so far.

Ecopetrol

(28)

integrated oil firms in Latin America. Ecopetrol performs crude oil and natural gas exploration, production, refining, and transportation. Ecopetrol explores for oil and gas across Colombia, and is expanding internationally through explorative partnerships in Brazil, Peru, and the US Gulf of Mexico. It plays an important role in raising awareness and respect for the environment in Colombia. Ecopetrol has had outstanding performance in business, but unfortunately according to the CHRD database it has caused (various?) human rights abuses when operating in Colombia.

Drummond

Located in Cesar and Magdalena, Colombia, Drummond’s primary mission is the exploration, mining, transportation and exportation of coal. In 2012, it shipped approximately 25 million tons of coal to customers in more than 30 countries worldwide. Further, 83% of employees who work for Drummond Colombia are from local communities. It makes significant contributions to local economy and social development but according to the CHRD Colombia database it has damaged the local environment and violated local communities during its coal mining operations.

Petrobras

Brazil’s leading oil company-- Petrobras was founded in 1953 and has been operating in Colombia since 1972. After a period in which emphasis was put on the operations in the Middle East, it returned to Colombia in 1986 to work in exploration. In 2014, it completed 28 years of continuous operations in exploration and production, and eight years in fuel and lubricant marketing and distribution in Colombia. Petrobras makes a great effort in local community development and environmental protection. It is worth noting that the CHRD database records that Petrobras did not cause any human rights abuse during its operations.

C

HAPTER

5 F

INDINGS

This chapter contains three main sections which are based on the three hypotheses I made in the Chapter 2. Each section covers the findings for its related hypothesis. The chapter ends with a summary of the research findings.

(29)

environment and discuss from three perspectives: transparency of CEO letters, transparency of environmental related information and transparency of environmental policy to employees. The second session will follow similar ways to explore the impact of transparency on development & poverty issues. In the last section, I will present my findings on the impact of EITI on poverty alleviation and local community development.

5.1 R

ELATIONSHIP BETWEEN TRANSPARENCY AND ENVIRONMENT

5.1.1ANALYSIS FROM CEO LETTER

There are various studies emphasizing the importance of CEO letter in annual report and CSR report (Jameson, 2000). Such letters present the different ways, in which a CEO can address certain audiences, communicate values and ethics, and illustrate the company’s performance along with other issues (Garzone 2004; Hyland 1998). A CEO is the most powerful person in the firm and therefore is the most credible in voicing the firm’s stance on matters related to ethics. CEO letters provide an ideal opportunity for the CEO to address issues concerning the firm, the industry and wider society and thereby highlight the firm in a positive light to a wider range of audiences (Pelsmaekers, 2011). Furthermore, CEO statements, to a great extent shape the content of whole report. So analysing the content of CEO letters is a good way to figure out a firms’ attitude towards information disclosure. Table 4 provides a list of the number of statement mentioned by CEOs related to environment and gives some examples of their expressions. I take both number and content of statements into consideration when analyzing transparency level of those cases.

Company and year of report

Number of statement

Example

Shell 2006 5 “Addressing concerns about climate change is also a critical task.”

Shell 2012 5 “We are producing almost as much cleaner-burning natural gas as oil, producing low-carbon biofuel, helping to develop carbon capture and storage (CCS) technologies, and putting in place steps to improve our energy efficiency”

ExxonMobil 2008 2 “We recognize our responsibility to help meet this growing energy demand while working to reduce the impact on the environment. To that end, we are taking action—improving our own energy efficiency”

(30)

ExxonMobil 2012 4 “Our commitment to operating in an environmentally responsible manner is anchored in our Environmental Policy. Our approach starts with gaining a thorough understanding of the local surroundings.”

Addax Petroleum 2009

2 “Following the principle of organic integration of its economic goals with social and environmental responsibilities, the Company attaches great importance to the sustainable development of the society and the environment alongside the Company’s corporate success.”

Addax Petroleum 2012

3 “We implemented a strategy focused on resources, marketing, integration, international operations, differentiation and low-carbon operations.”

Ecopetrol 2010 8 “In 2010 Ecopetrol invested $ 988,284 million in its Environmental Management Program, which represents a 62% increase over the previous year. Of that total…”

Ecopetrol 2012 1 “In terms of the environment, Ecopetrol directly invested $ 1.16 billion last year in various programs for the protection and recovery of renewable natural resources, risk management and protection projects for water and air resources”

Drummond 2010 0 N/A

Drummond 2012 4 “Drummond’s commitment to its people, communities, the environment, the region and the country is rock-solid.”

Petrobras 2007 2 “In 2012, we set up a working group to survey all company- related spills or leaks and show best practices for avoiding them. We wish to reaffirm the immense value we attach to life and the environment.”

Petrobras 2012 0 N/A

Table 4 List of CEO environmental statement

After coding, I find that the CEO’s attitude towards environmental issues seem to differ. In the case of Nigeria, CEOs from Shell and ExxonMobil mentioned environmental issues more frequently and seem pay more attention to environmental information disclosure. They emphasize the importance of environmental protection more and in greater detail than another Nigerian case---Addax Petroleum. For example, in the 2012 CSR report, the CEO from Addax Petroleum stated only briefly that they implemented an environmental related strategy to protect the environment:

“We implemented a strategy focused on resources, marketing, integration, international operations, differentiation and low-carbon operations.” （Addax Petroleum 2012）

In contrast, in the corresponding CSR report in 2012, the CEO from Shell highlights the specific environmental problem faced by Nigeria rather than only vaguely mentioning the implementation of an environmental protection strategy.

(31)

exported overseas, and the rest turned into low-grade fuel in local makeshift refineries, causing environmental damage.” (Shell 2012)

Firms from Colombia also show differentiation in the language the CEOs use. The CEO from Ecopetrol assigned a large amount of space to discuss its attempts to protect the environment. Comparing this with all the other companies, it appears to be the only one which released precise data about environmental investment in their CEO letter. This, in short, reflects a high level of transparency in their report.

“In 2010 Ecopetrol invested $ 988,284 million in its Environmental Management Program, which represents a 62% increase over the previous year. Of that total, $ 95,609 million was related to environmental expenditures related to the operation, $ 306,240 million to operating investments, $ 574,995 million, to investments in programs for the recovery and protection of renewable natural resources, and $ 11,440 million, to investment in flora and fauna (biodiversity).” (Ecopetrol 2010)

It is also worthwhile noting that the CEO from Drummond and Petrobras did not even mention the environment in 2010 and 2012. The absence of discussion of the environment in their CEO letter is to the detriment of their disclosure performance. Through compare their CEO letters within and cross these two countries, it seems that CEOs from Ecopetrol and Shell prefer to disclose more information than others not only in terms of frequency of mentioning environmental problems, but also in terms of details of content.

5.1.2ENVIRONMENT INFORMATION DISCLOSURE IN CSR REPORT

As I mentioned in Methodology part, I followed Dawkins &Ngunjiri’s (2008) idea and classified environmental related information into three dimensions: environment issue description, environment related activity and environmental project outcome. Here I will compare the level of transparency of all 6 cases from these three dimensions individually.

Environmental issue description is about a firm’s statements about their real performance, regarding the environmental impact. For example, oil spills, air pollution, and other environmental destruction due to their operational activities. This kind of information always has a negative impact on a firm’s reputation and image, and it seems that corporations expose more information to describe their environmental CAAs are regarded as more transparent.

(32)

After coding the information about the environmental description of reports, I find that two firms appear to be extraordinary ---Shell and Addax Petroleum. Shell is the only one of the cases which described their real performance in Nigeria in both 2006 and 2012 reports; they report the real number of oil spills and the causes of these terrible incidents are also stated. It even revealed the number of employee fatalities:

“…around 95% was the result of sabotage and oil theft. Over the last three years, we estimate that these criminal acts accounted for around 85% of the volume of oil spilled from SPDC facilities. The\scale of the problem puts enormous strain on our staff, diverting time and resources to tackle the environmental consequences. It can also place our staff in danger. Two contractors working for SPDC were tragically killed in 2012 in an armed attack while assessing the remediation of an oil-spill site.”(Shell 2012)

Noting the number of deaths of workers seems signify an extraordinarily transparent attitude towards the employees, stakeholders and the public. In order to protect their reputation and image, firms normally are not likely to disclose negative information to outside. Thus telling this tragic truth makes Shell obtain an impression of a high level transparency. Conversely, Addax Petroleum does not mention any environmental abuse in their reports. However this does not means that it does not have these kinds of problems. According to the data provided by the Nigerian Oil Spill Monitor 3(https://oilspillmonitor.ng/), Addax Petroleum is responsible for 21 oil spills in Nigeria from 2009 to 2013. Among them, 4 spills were due to equipment failure, 5 were the result of pipeline corrosion. Based on the above data, the transparency of Addax Petroleum report is called in to question and in comparison Shell seems to perform better in environmental information disclosure. More details are available in appendix table 5.

Secondly, we turn to the analysis of information about activity related to the environment. Comparing with their limited efforts to describe environmental problem., I find that all of the 6 firms

3

The Nigerian Oil Spill Monitor is a website which gives public access to current official data on oil spills collected by the National Oil Spill Detection and Response Agency (NOSDRA), the Nigerian environmental regulator, and displays this in an online map. This system aims to show more clearly which oil companies are engaged with the regulatory bodies and are fulfilling their legal

responsibilities when operate in Nigeria.

(33)

disclose plenty information about how they take action to protect environment. Most of them mention environmental management from energy, solids, water, biodiversity and emergency perspectives. The difference is that some firms, such as Addax Petroleum, only briefly describe the projects they carry out, while others such as Shell and Ecopetrol, break down every environmental management area into smaller categories and provide more detailed information of their specific projects. So there is a big difference in the number of statement about environment activities which you can see in the Table 6.

Through comparing the coding results it seems likely that all of the six firms released more information about their environmental project than previous year. This seems indicate an increasing trend towards greater transparency in the oil and gas industry. Except this similar trend, lots of differences appear among those firms. Addax Petroleum, for example, seems to release the least information (5 statements in 2009 report) among its competitors both from Nigeria and Colombia while Shell (23 statements in 2012 report) and Ecopetrol (34 statements in 2012 report) looks outstanding on this account. Moreover, Shell and Ecopetrol seem to have a higher level of transparency not only in the amount of information disclosure, but also with the detail in the content. For example, Ecopetrol make a distinction between hazardous and non-hazardous waste when talking about the project of waste reduction.

“Within the environmental commitments made by Ecopetrol of particular importance is solid waste, whether hazardous or non-hazardous or treated as domestic. At the end of the year the generation of hazardous and non-hazardous waste was of 169,613.7 tons, 11% lower than that generated in 2009” (Ecopetrol 2010)

Similarly, Shell described the specific action they took when serious oil spills occurs in Nigeria

“The CSRC visited Nigeria and observed the environmental damage from illegal refining in the Niger Delta. While there, it also visited facilities and met with government officials, community representatives and local non-governmental organizations. During a visit to Shell’s UK operations in the North Sea, the CSRC saw how safety is managed on an oil and gas platform”. (Shell 2012)

(34)

“In 2012, Sinopec Corp. continued with its clean production program and managed to reduce emissions by sweetening and denitrifying boiler flue gas” (Addax Petroleum 2012)

Finally, the last and the most important aspect in this section is the comparison disclosure level of the outcome of environmental projects. Releasing information of project outcome is not common in firms’ report. Most of them only state what kinds of project they carry out instead of showing readers the result or improvement after their project implementation. The statement of environmental project outcome do include, for example, to what extent oil spills were reduced due to the improvement of the quality of pipelines, how much CO2 emission were reduced due to the increase of energy efficiency, or how much water was saved as a result of the water saving program etc. (detail in table 7). Presenting this kind of information can increase the reliability and credibility of the whole report when read by the public.

During my analysis, I find that the disclosure level of environmental project outcomes seems follow a similar distribution to the previous two dimensions; Addax Petroleum are less transparent among firms in Nigeria and Ecopetrol perform better than the other two companies in Colombia. Addax Petroleum only mentioned the outcome of their project once in the 2009 report. In contrast, ExxonMobil showed the outcomes of its projects 12 times in its 2009 report and Ecopetrol mentioned outcomes 20 times in their 2012 report. Although, the coverage of environmental outcome statements is different between cases, the languages they use is similar and it seems that they prefer to compare data and performance from previous years to substantiate their project outcomes, which in turn, makes the whole report more reliable and trustworthy. For instance,

“The volume of operational spills onshore from SPDC facilities improved again in 2012, falling to 0.2 thousand tones, a drop of over 50% from the previous year. The number of operational spills also improved, falling to 36 in 2012, a decrease of over 40%.” (Shell 2012)

“Comprehensive energy consumption of every RMB10,000 production value of the company was 0.72ton coal equivalent in 2009, decreased by 15.29% compared with 2005”(Addax Petroleum 2009)

“The barrels spilled through environmental incidents due to operational causes were 5,107 barrels, against a maximum allowable limit of 2,181 barrels. However, this represents a reduction compared with